NEW DELHI: Those planning to buy their first house should rush and complete the formalities by March 31 to avail of the additional tax benefit against the interest paid on a home loan. That’s because an exemption available to taxpayers will lapse in the current financial year which enables them to reduce the interest paid from the taxable income. The reduction can be up to Rs 1.5 lakh under section 24 of the Income Tax Act and up to Rs 1 lakh under section 80EE against the interest paid on home loan.

The benefit under section 80EE can be availed only to buy the first house of a value of Rs 40 lakh, provided the maximum loan amount is Rs 25 lakh. The second provision is due to lapse. But those who have already borrowed need not worry. The provision was introduced in the 2013-14 budget, although the benefit was available only for a year to provide a much-needed impetus to housing, which has been hit by rising interest rates and falling real income levels.

In the Vote On Account presented on Monday, finance minister P Chidambaram decided not to amend any direct tax provisions, many of which are due to end on March 31, 2014. Although the next finance minister has the option to reintroduce the benefit, it may not be available for the first three-four months of 2014-15. Similarly, the benefit of income tax rebate to companies which are involved in power generation and distribution will also lapse. The provision of lower dividend tax paid by Indian companies on dividend received from foreign companies will also lapse on March 31, 2014.

Executive director (taxation) of PWC India Kuldeep Kumar said that the benefit under section 80EE was very helpful to those who were buying their first house. He said that if the interest payable during a year is less than Rs 1 lakh, the unclaimed amount will be allowed to be claimed in the next financial year. The benefit was also allowed during the construction period.

With this provision, one could avail a deduction of Rs 2.5 lakh from his taxable income against the interest paid on home loan.

After the provision lapses, the first home buyer, falling under 30% bracket, will lose Rs 30,000 and those who are under 20% bracket will lose Rs 20,000.